Health Facilities of California Mut. Ins. Co., Inc. v. British American Ins. Grp., Ltd. et.al.(United States District Court, Central District of California, April 5, 2011)
This reinsurance dispute arises from claims involving the return of excess deposits and premiums from certain reinsurance contracts entered into by plaintiff, Health Facilities of California (HFC), an incorporated risk retention group. Defendants, British American Insurance Group (BAIG) and Peter Myrtle, are Louisiana citizens acting as reinsurance intermediaries transmitting premiums payments, payments of return premium and collecting payments.
HFC entered into a reinsurance contract with defendants; however, before BAIG calculated the precise premiums, HFC provided a deposit upon execution of the contract with the understanding that any excess deposit would be returned. After the premiums on the reinsurance contract were calculated, HFC was allegedly owed $2.1 million in excess deposits. When HFC demanded a return of same, BAIC instructed plaintiff to apply the money to further insurance premiums, against HFC’s wishes, who then brought suit.
Previously, upon a detailed inquiry into the facts of the case, the court found a lack of diversity, dismissing the case for lack of subject matter jurisdiction. Specifically, the court determined that the plaintiff failed to carry its burden in establishing a complete lack of diversity of the parties noting the board makes decisions, at least in part, on conference calls, where four of the seven board members are physically in California and three are not. Moreover, the court was not persuaded that because the majority of the board of directors was located in California and because some board meetings have taken place in California via telephone that the principal place of business was, indeed, California. The court further determined that plaintiff’s allegations as to the location of several board members and the concentration of their risks in California was unavailing and spoke to the corporation’s “‘center of gravity’ a diversity consideration dispensed with in Hertz v. Friend, 130 S. Ct. 1181 (2010).
On the motion for reconsideration, plaintiff proffered an entirely new argument that HFC’s nerve center was actually in Colorado and further argued that reconsideration was warranted under Federal Rule 60(b)(1)(excusable neglect), Rule 60(b)(2)(newly discovered evidence), Rule 60(b)(6)(any reason justifying relief) and Local Rules regarding new facts.
The Court denied the motion for reconsideration holding that in the Ninth Circuit, attorney error does not fall within Rule 60(b)’s provision for excusable neglect that would allow them to disturb an Order. The court stated, “[f]or the purposes of subsection 60(b)(1), parties should be bound by and accountable for the deliberate actions of themselves and their chosen counsel. This includes not only an innocent, albeit careless or negligent attorney mistake, but also intentional attorney misconduct.” (Citation omitted). Likewise, under Local Rule 7-18, the court noted that a motion for reconsideration is not an opportunity for the parties to raise an argument that could have, and should have, been raised earlier. As the court concluded that “HFC’s Motion for Reconsideration [was] nothing more than a request for a second bite at the apple,” the court denied the motion in its entirety, again holding that HFC failed to meet its burden to establish that diversity jurisdiction existed between the parties.
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Patrick Omilian and Rick Cohen